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Big Opportunities Ahead for This Financial Company

Big Opportunities Ahead for This Financial Company:

The Canadian banks are often viewed as the safest group of stocks trading on the Canadian markets. However, we may see banks such as TD Bank and Royal Bank of Canada get hit for quite some time as they continue to set aside cash for loan loss provisions. Given the uncertainty in the banking sector, goeasy (TSX:GSY) may be setting up for a prime opportunity.

For the unfamiliar, goeasy has two business segments: easyfinancial, which offers loans to non-prime borrowers, and easyhome, which sells furniture on a rent-to-own basis. Given the tremendous increase in unemployment as a result of the COVID-19 pandemic, more individuals may find themselves turning to one of the services goeasy offers.

The company has realized the opportunity presented to it and has been pulling out all the stops to ensure consumers find its services attractive. The company has kept the goeasy community updated on how it plans to aid consumers through the pandemic. In March, goeasy instituted a doorstep delivery service to individuals interested in its easyhome business.

The decisions by management seem to have paid off for the company, as its financial performance continues to impress investors. During its earnings call on May 6, goeasy reported a record quarterly revenue of $167 million, up 20% over the same quarter last year. Its loan portfolio also grew 33% over the same period last year from $879 million to $1.17 billion. This past quarter also marked the 16th consecutive year of dividend distribution by the company and the sixth consecutive year of dividend increases. All this was during one of the most turbulent financial quarters for the broader market in recent history.

Just as impressive as its financial performance, goeasy reported that it experienced no reduction in personnel during the COVID-19 lockdowns. For comparison, Statistics Canada reported that unemployment rates soared to 13% as nearly two million Canadians lost jobs in April.

goeasy has been one of the best-performing growth stocks in Canada over the past five years. Before the COVID-19 crash, the stock has grown 310.85% since June 2015. The recent market downturn resulted in goeasy stock returning to levels last seen in Q4 2017, after falling over 60%. The company has shown resilience since reaching its bottom, growing more than 130% over the past two months.

While this stock seems like a no-brainer, investors should be warned. Because the company focuses its loans on subprime borrowers, it could be in serious trouble if its clients are unable to repay those loans. However, given the stability and growth by the company, it seems like the risk to reward is worth taking a chance on.

Time will tell if goeasy is able to continue its rapid growth; all indications seem to suggest it will. The company was recently highlighted by Motley Fool writers as a stock to watch in the coming month. Given the evidence on hand, it may be good to consider adding goeasy to your portfolio.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

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CRA: Here’s 1 Giant Tax Saver for Your RRSP

Fool contributor Jed Lloren has no position in the companies mentioned.

The post Big Opportunities Ahead for This Financial Company appeared first on The Motley Fool Canada.

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Price Analysis 6/1: BTC, ETH, XRP, BCH, BSV, LTC, BNB, EOS, XTZ, ADA

Price Analysis 6/1: BTC, ETH, XRP, BCH, BSV, LTC, BNB, EOS, XTZ, ADA:

Tension between China and the U.S. is increasing and if the current trade deal is scrapped Bitcoin could be a major beneficiary.

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3 Top Canadian Bank Stocks to Buy in June

3 Top Canadian Bank Stocks to Buy in June:

It was a mixed end of the month for Canadian bank stocks. Profits were down steeply for the quarter compared with last year’s performance during the same quarter. Loan-loss provisions were high, signifying a rocky outlook for the rest of the year. But the overall consensus was that the situation could have been worse. Here are three of the best Big Five banks worthy of your investment today.

Bank stocks are an all-weather play for income

If a drawn out, L-shaped recession emerges, investors might expect to see some kind of federal intervention to save key banks. While there is no indication of this possibility at present, investors should rest a little easier knowing that names like TD Bank are always going to be stoutly defended. TD Bank’s strong presence in the United States puts it on solid footing on both sides of the border.

TD Bank is arguably the most important Canadian bank on the world stage and essential to the domestic economy. Diversification is key when it comes to the current market, and this name delivers. While TD Bank, for instance, could be considered a pure play on financials, its strong presence on either side of the U.S. border brings diversification across North American markets.

A strong sector for rich yields and growth potential

Another top Big Five buy, Scotiabank is strongly tied to the domestic housing market, which could mean good things in the event of a recovery. There’s a potential thesis for a post-pandemic exodus of cooped-up Canadians into a rebooted housing market. Banks could be well positioned to capitalize on a housing rally. Scotiabank also packs growth potential in Latin American markets via its presence in Pacific Alliance countries.

While it’s not the time to be chasing yields, CIBC’s juicy distribution looks safe for the time being. It’s also the richest dividend of the Big Five. Furthermore, CIBC is arguably the Big Five bank most focused on Canada, making it the right choice for any investor seeking a pure play on the domestic economy. Indeed, CIBC could be a reassuring long-term pick for TSX investors eyeing risk from political and economic unrest beyond Canada’s borders.

Investors were unfazed by last week’s news that the Big Five had seen huge year-on-year drops in profit. Part of the reason for this bullishness may be two-fold. First, a run of bad quarters was already baked into the market. Second, making provisions for bad loans, while confirming a dire outlook for the rest of 2020, strengthens the Big Five banks to the tune of $11 billion collectively.

This loss provisioning helps to make Canadian banks better long-term investments. It should also be noted that the Big Five banks were far from unprofitable during their most recent quarter. Altogether, the nation’s five largest moneylenders have raked in $5 billion since February. It’s notable that none of the Big Five reduced their dividends last week. This should help to reassure passive-income investors of the longevity of their investments.

Some of the best stocks on the TSX have never been better value. The Motley Fool has rounded up the following highlights…

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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

The post 3 Top Canadian Bank Stocks to Buy in June appeared first on The Motley Fool Canada.

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This Market Is Unstoppable — New All-Time Highs Ahead

This Market Is Unstoppable — New All-Time Highs Ahead:

We saw in April and May that, despite one economic setback after another, the market continued to climb higher.

And now, even with record high unemployment and civil unrest across the country, stocks are poised for an even bigger rally.

One where the major indexes will return to their February highs … and then keep on soaring upward.

In today’s Market Insights video, my colleague Ian King and I discuss why this market is unstoppable … and how you can position your portfolio now to make the biggest profits later.

Best of Good Buys,

Jeff L. Yastine

Editor, Total Wealth Insider

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America 2.0: Trials Make Us Stronger

America 2.0: Trials Make Us Stronger:

We’re not perfect. We have never been perfect.

But the great thing about this country is our drive.

Sure, we make mistakes. But America has the desire — and strength — to do better.

And we will.

Saturday’s SpaceX launch brought us together when we needed it the most. It ignited our sense of adventure.

And it was a true launch of America 2.0.

If you’re having a hard time staying positive or you need a glimpse of America united to shoot for the stars, watch today’s Market Talk.

See how we will overcome these trials to make our country stronger than ever:

Regards,

Paul Mampilly

Editor, Profits Unlimited

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Warning: House Prices Could Drop 18% – and These REITs Could Drop Further

Warning: House Prices Could Drop 18% – and These REITs Could Drop Further:

Canada’s housing market is a national sport. House prices have been relentlessly surging for over a decade. Now, with unemployment at a record high and an ongoing pandemic, Canada’s housing market could finally deflate. 

The Canadian Mortgage and Housing Corporation (CMHC) has forecast falling home prices of to 18 per cent in the 12 months ahead. That’s the worst-case scenario. CMHC’s base case forecast was a 9% drop. 

It’s also worth noting that these forecasts are for average prices across the country. Expensive markets such as Toronto or Vancouver could experience deeper declines in value. That, of course, is bad news for homeowners and real estate investors. However, it also impacts dividend investors who rely on real estate investment trusts (REITs).

REITs are tax-advantaged structures for rental income. These listed securities can offer better dividends than traditional stocks because they can access more leverage and extract more free cash flow from rents. If the housing market collapses, leverage tightens and rental income is squeezed. 

Residential REITs with higher leverage or more exposure to major cities could be at the most risk. Here are two REITs that could probably decline faster than the national housing market. 

Northview Apartment REIT

Northview Apartment REIT (TSX:NVU.UN) stock dipped when the COVID-19n outbreak began, but has since recovered all its lost value. In fact, the stock is now 13% higher than at the start of the year. Investors seem to be optimistic that the housing market will hold up better than expected. 

However, Northview’s portfolio looks overexposed to some vulnerable markets. More than a third of its multifamily units are located in Ontario. Nearly 10% are in Toronto and its surrounding areas, which are at the apex of the housing market crisis. However, several thousand units are in what I would call university towns.

The housing markets in Guelph, Kitchener and Hamilton, hinge on the arrival of university students. This year, of course, universities have switched to virtual classes, which means student arrivals will plunge. International student arrivals could disappear altogether, putting pressure on these overvalued housing markets. 

Northview also has a sizable debt burden. Net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) was as high as 10.1. While the debt coverage ratio was 1.60. These risks don’t seem to be priced into the REIT’s elevated stock price.

InteRent REIT

InterRent REIT is similarly exposed to vulnerable markets. Two-thirds of its portfolio is concentrated in the Greater Toronto Area or Montreal. While Montreal’s housing market isn’t as overheated as Vancouver or Toronto, it’s relatively overvalued. 

Rents in Montreal’s downtown are dropping faster than anywhere else in Canada. Average one- and two-bedroom apartment rents declined 5.2% and 2.6%, respectively, in April. The flood of Airbnb units entering the long-term rental market is the prime reason for this plunge in tourist-heavy Montreal. 

The stock price has recovered its losses and is flat year to date. However, a housing market crash focused on Canada’s largest cities could be detrimental to InterRent’s book value and rental income. 

Bottom line

The housing market is due for a correction, and prices in Toronto and Vancouver could face steeper declines. REITs focused on major cities or with too much debt could magnify the incoming crash.

Before I forget…

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

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Which Housing Crash Will Be Worse: Vancouver or Toronto?

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

The post Warning: House Prices Could Drop 18% – and These REITs Could Drop Further appeared first on The Motley Fool Canada.

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CERB Warning: Make $8000 in Dividend Income Instead

CERB Warning: Make $8000 in Dividend Income Instead:

Canadians are frantically searching for cash these days. The COVID-19 pandemic has brought not only disease to our doorstep, but also financial strain. Layoffs, business closures, and even the collapse of industries are just some of the things affecting the economy.

It’s left many looking for relief, and the Canadian government offered it up with the Canadian Emergency Response Benefit (CERB).

CERB isn’t for all

As of writing, almost 15 million Canadians applied for the CERB. That’s over $40 billion in benefits paid so far. With the benefit set to continue until at least August, that leaves even more opportunity for Canadians to sign up.

But there’s now a word of warning being passed around. Actually, several words. While the CERB might look like free money, it certainly isn’t. In the first place, if you aren’t eligible the Canada Revenue Agency (CRA) will come knocking.

Not tomorrow, but eventually you will have to pay back every cent of that $8,000 in cash from the 16 weeks you collected it. If you are eligible, that money still must be claimed on your taxes, or again you’ll pay up later. And finally, the more people sign up, the more we all have to pay in our taxes moving forward.

Granted, there are absolutely people out there who desperately need the CERB. So please let them have it. If you don’t, you can’t still bring in $8,000 in cash this year. And the great news? Using your TFSA means it’ll all be tax free.

Dividends galore

If you have the cash on hand, you can certainly bring in $8,000 in dividend income by choosing the right stocks. Luckily, most stocks are trading at a significant discount right now. That leaves the ability to bring in even more passive income than you normally would. That’s way better than the CERB, because now you can bring in that income every year, not just once.

The stocks I would consider are ones that are likely to be around now and after the market crash. Enbridge Inc, Canadian Imperial Bank of Commerce and Slate Retail REIT are all great choices in this case.

Enbridge is a pipeline company with long-term contracts, which means its dividends will be secure for decades to come. On top of that, it has a growth portfolio for the next few years that should see its share price and dividends increase regularly. CIBC is another great option as one of Canada’s Big Six Banks, with the highest dividend yield of the banks.

It has a lot of room to grow, and is a great price because of its exposure to the housing industry at the moment. Finally, Slate REIT has been hit because of its ownership of retail stores. But when the dust settles, this stock should see a huge upside that should boost its already significant dividend yield.

Bottom line

By choosing these stocks, here’s how your dividend income portfolio could look if you and your partner use your combined TFSA contribution room. Investors could put $37,450 into CIBC for $2,500 in dividend income, $33,844.48 for another $2,500, and $22,352.31 for $3,000.

That would bring in $8,000 of passive income each year for an initial investment of $93,646.79. That’s $8,000 every year, whereas CERB can only give you 16 weeks.

With that extra TFSA contribution room, here are some cheap stocks to buy up now.

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Fool contributor Amy Legate-Wolfe owns shares of ENBRIDGE INC. The Motley Fool owns shares of and recommends Enbridge.

The post CERB Warning: Make $8000 in Dividend Income Instead appeared first on The Motley Fool Canada.

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Music Video Director for Pop Superstars Dives Into Crypto Trading

Music Video Director for Pop Superstars Dives Into Crypto Trading:

Famed pop music video director Joseph Kahn has announced that cryptocurrency trading is his new favorite hobby.

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Invest $1,000 in This Oil Stock Today to Profit in 2021

Invest $1,000 in This Oil Stock Today to Profit in 2021:

Canadian oil stocks are under considerable pressure. Oil’s sharp collapse, which saw West Texas Intermediate (WTI) plunge into negative territory for the first time ever, is hitting the energy patch hard. While the immediate outlook remains gloomy, this has created an opportunity to acquire quality drillers at once in a generation prices.

One oil stock that stands out is Frontera Energy (TSX:FEC). The driller, which emerged from the bankruptcy of Pacific Exploration and Production, has lost 64% since the start of 2020. This is significantly greater than the 55% decline of the international Brent benchmark price.

While there are plenty of headwinds ahead, there are signs that Frontera is very attractively valued, making it a speculative buy for contrarian investors betting on higher oil.

Why invest in oil stocks?

A key advantage of investing in oil companies rather than oil is their levered exposure to the price of crude. This means that when oil plunge their price decline, like Frontera’s, typically exceeds that of benchmark oil prices.

Conversely, when oil rallies it means they generally experience far greater gains than oil, meaning they can deliver outsized returns to investors.

Key is identifying those upstream oil producers that possess quality assets and strong fundamentals, allowing them to weather the current crisis.

Quality oil portfolio

Frontera owns a diversified quality portfolio of oil assets across South America, with its main producing acreage located in Colombia. This not only gives Frontera a handy financial advantage by allowing it to access Brent pricing, which trades at a premium to WTI, but benefit from lower operating expenses.

As a result, Frontera reported a credible first-quarter 2020 operating netback of US$16.21 per barrel of oil sold. The driller’s ongoing push to reduce operational costs and shutter non-economic production will keep its operations cash flow positive. That will be aided by Colombian government initiatives to reduce pipeline transportation costs.

Solid fundamentals for an oil stock

One of Frontera’s key strengths is its considerable liquidity and solid balance sheet. It finished the first quarter with US$265 million in cash and another US$30 million of restricted cash. This gives Frontera considerable financial flexibility, positioning it to emerge from the latest crisis relatively unscathed.

Importantly, Frontera has a very manageable US$364 million of long-term debt and lease liabilities. There are no debt repayments due until 2023, giving Frontera considerable breathing space to overcome the current crisis.

What makes Frontera a top oil stock to buy (aside from its solid balance sheet and quality assets) is that its shares are on sale. The driller is trading at a deep discount to the after-tax net asset value of its proven and probably oil reserves.

At the time of writing, Frontera’s price of $3.55 per share is less than a third of its $11 per share after-tax net asset value. This highlights the considerable potential upside available when oil firms and Frontera’s stock rallies.

Foolish takeaway

Frontera has long failed to unlock value from its oil assets. Finally, toward the end of 2019 it had resolved many of its legacy issues and was on track to reward investors, but this was derailed by the latest oil price collapse and coronavirus pandemic.

Nonetheless, Frontera will survive the current crisis. As oil prices rally higher, it will deliver considerable value for shareholders during the second half of 2020.

Looking for bargain stocks that could deliver outsized returns?

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

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Fool contributor Matt Smith has no position in any of the stocks mentioned.

The post Invest $1,000 in This Oil Stock Today to Profit in 2021 appeared first on The Motley Fool Canada.

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3 Dividend Must-Have Investments

3 Dividend Must-Have Investments:

Generating a stable income for retirement is one of the primary goals of any investor. In order to accomplish that goal and remain diversified, investors should invest in a multitude of stocks across a broad section of the market. Here are some income-producing investments that should be income must-haves for nearly any portfolio.

This is a dividend must-have

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is neither the largest or the most well-known of Canada’s big banks. It is, however, a well-diversified bank with a handsome dividend and plenty of growth potential.

When it comes to international expansion, Scotiabank opted for the Latin American nations of Mexico, Chile, Columbia, and Peru. In contrast, nearly all of Canada’s other big banks opted towards expanding into the areas of the U.S. market. That’s not to say that Scotiabank didn’t expand elsewhere — it did, but the focus was on those four nations.

Those four nations are part of a trade bloc known as the Pacific Alliance. By expanding throughout those nations, Scotiabank has effectively become a familiar face to do business across the region. This has led to impressive growth during earnings season, also fueling the strong growth of Scotiabank’s attractive, must-have dividend.

Scotiabank currently offers a quarterly distribution every January, April, July, and October that works out to a handsome 6.28% yield.

A solid, stable utility

Few investments can offer the defensive peace of mind that Fortis (TSX:FTS)(NYSE:FTS) has. Fortis is one of the largest utilities in North America with a diversified portfolio of regulated facilities that is scattered across the U.S. and Canada.

One of the main benefits of investing in a utility stems from the business model itself. Utilities provide a regulated service in exchange for a recurring revenue stream. The terms of those agreements are set out in regulated long-term agreements that can span decades. That stable and recurring revenue stream leads to handsome dividends for investors.

Fortis offers a quarterly dividend that currently works out to a respectable 3.58%. Additionally, Fortis boasts well over four decades of consecutive annual bumps to that must-have dividend. This is something that few companies can offer, and Fortis remains committed to continuing that trend.

Fortis provides that handsome quarterly distribution every February, May, August, and November.

Your cell phone can make you rich!

Telecoms represent one additional area to consider. BCE (TSX:BCE)(NYSE:BCE) in particular operates one of the largest wireless networks in Canada as well as a vast media empire. That media segment includes TV and radio stations as well as an interest in professional sports teams.

BCE’s wireless segment is what investors should be most excited about. Wireless connections have evolved in the past decade from communications devices to become a must-have of our digital life. In short, an endless array of new data-hungry apps and devices provide a recurring revenue stream for BCE and in turn, a generous dividend.

BCE’s quarterly dividend currently works out to an appetizing 5.91% yield. Apart from the growing necessity of wireless connections, worth noting is that BCE has been paying dividends for well over a century. In other words, this makes BCE an incredibly stable investment to make for any portfolio of dividend must-have investments.

BCE has distributions in March, June, September, and December.

This Tiny TSX Stock Could Be the Next Shopify

One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting… Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago – before it skyrocketed by 1,211%! Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!

Click here to discover how!

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Fool contributor Demetris Afxentiou owns shares of Fortis Inc. and The Bank of Nova Scotia. The Motley Fool recommends BANK OF NOVA SCOTIA.

The post 3 Dividend Must-Have Investments appeared first on The Motley Fool Canada.

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Goldman Scandal, BTC Bull Trap Fears, How Libra Will Make Money: Hodler’s Digest, May 25–31

Goldman Scandal, BTC Bull Trap Fears, How Libra Will Make Money: Hodler’s Digest, May 25–31:

Goldman Sachs attacks crypto, why Bitcoin may be wandering into a bull trap, and how Libra is going to make money.

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ALERT: 2 Super-Cheap Bank Stocks to Buy Today

ALERT: 2 Super-Cheap Bank Stocks to Buy Today:

Investors have been treated to the second quarter of Canadian bank earnings in late May. Predictably, Canada’s top financial firms have been squeezed due to the COVID-19 pandemic. Provisions for loan losses have skyrocketed at top banks, but bank stocks have reacted surprisingly well. Bank stocks took another spill on Friday, which means investors may want to consider buying the dip. Today, I want to look at two bank stocks that offer monster dividends. Let’s dive in.

One regional Canadian bank stock that fell after earnings

Laurentian Bank (TSX:LB) is a regional bank based in Quebec. Its shares were down 9.39% in early afternoon trading on May 29. The stock has dropped 28% in 2020 so far. Laurentian released its second-quarter 2020 results on the same day.

The bank took major hits due to the COVID-19 pandemic throughout the second quarter. Adjusted net income plunged 76% year over year to $11.9 million and adjusted diluted earnings per share fell 81% to $0.20. Laurentian’s provision for credit losses increased to $54.9 million in Q2 2020. This is compared to $9.2 million in the second quarter of 2019. This increase was driven by higher collective allowances. However, net write-offs only climbed to 0.03% of loans compared to 0.02% in the prior year.

Shares of Laurentian Bank were trending toward technically oversold territory at the time of this writing. The bank slashed its dividend by 40% to a quarterly payout of $0.40 per share. This still represents a strong 5.6% yield. Quebec was one of the first provinces to push forward with its economic reopening. I like this regional bank stock as a buy-the-dip opportunity right now.

If you’re on the hunt for income, look to CIBC

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has boasted one of the best dividend yields of its peers in recent years. The fifth largest of the Big Six Canadian banks released its second-quarter results on May 28. Shares of CIBC were down 1.91% in early afternoon trading on Friday, May 29. The stock has dropped 15% in 2020 so far.

Like its peers, CIBC struggled mightily in the second quarter. Its second-quarter profit fell 71% year over year to $392 million. It reported adjusted earnings per share of $0.94, which fell far short of analyst expectations. Meanwhile, its set-asides for loans erupted to $1.41 billion compared to $261 million in Q2 2019. Regardless, CIBC remains confident in its path forward. The bank still boasts an immaculate balance sheet, making it well equipped to weather this financial storm.

Earlier this year, I’d recommended that investors look to buy CIBC at a discount. Bank stocks have been hit hard this spring, which has generated some attractive buying opportunities. Shares of CIBC last possessed a favourable price-to-earnings ratio of 9.7 and a price-to-book value of one. Moreover, the bank announced that it would maintain its quarterly dividend payout of $1.46 per share. This represents a tasty 6.5% yield.

Bank stocks are not the only great option for investors right now…

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Motley Fool Canada‘s market-beating team has just released a brand-new FREE report revealing 5 “dirt cheap” stocks that you can buy today for under $49 a share. Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune. Don’t miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

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Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned.

The post ALERT: 2 Super-Cheap Bank Stocks to Buy Today appeared first on The Motley Fool Canada.

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Forget Air Canada (TSX:AC) and Airlines: Buy This 1 REIT Stock Instead

Forget Air Canada (TSX:AC) and Airlines: Buy This 1 REIT Stock Instead:

The coronavirus pandemic pulled the rug out from under airline companies. Air Canada (TSX:AC) was one of the TSX’s stellar performers in 2019 and the past decade. This year, however, Canada’s flag carrier is operating on less than 10% capacity and doing cargo flights only. Pretty soon, the stock price could drop to below $10.

If you have the appetite to invest, cast out airline stocks and consider Summit Industrial (TSX:SMU.UN) instead. This real estate investment trust (REIT) will deliver high, not zero, returns.

Fading glory

Air Canada’s first-quarter 2020 earnings results were understandable. Business screeched to a halt when the government announced border closures and travel restrictions. COVID-19 paralyzed domestic and international air travel.

Air Canada was down on its knees. The impact of the health crisis is so devastating. After 27 consecutive quarters of year-over-year operating revenue growth, the company is suddenly looking bankruptcy in the eye. Its operating loss ballooned to $433 million versus $127 operating income in the same quarter in 2019.

Apart from the significant financial damage to the company, 16,500 employees lost their jobs. Fortunately, the displaced workers will remain on the payroll from March 15 to June 6, 2020. Air Canada availed of the Canada Emergency Wage Subsidy (CEWS) to make rehiring possible.

The latest from Air Canada is the launching of a public offering for about $500 million worth of Class A and Class B voting shares. The company hopes to raise $1 billion to bolster its cash position and provide more flexibility to manage the health crisis.

Booming REIT

In contrast to Air Canada, Summit Industrial reported solid operating and financial performance for the first quarter (ended March 31, 2020). This $1.3 billion REIT had sterling results in crucial metrics compared with the same period in the prior year.

Revenue increased by 37.7%, while the occupancy rate was 98.4%. Summit’s average lease term is 5.3 years, with 1.6% annual contractual rent escalations. Because of the increase in revenue, operating growth, and robust operating performance, net rental income grew by 39.6%.

The focus of Summit is light industrial and other properties. It has nine newly-acquired light industrial properties with a total leasable space of 746,903 square feet.

Summit paid $43.6 million in maturing mortgage debt and secured a new $300 million unsecured revolving credit facility to be more financially flexible. The available cash-on-hand is $200 million, while its pool of unencumbered assets is worth $635.3 million.

Unlike Air Canada, Summit is generating revenue despite the pandemic. The REIT was able to collect about 96% of rent due in April, and around 87% of May rents to-date. Some tenants signed rent deferral agreements.

The record results tell you that Summit Industrial is a screaming buy. You can be a quasi-landlord by purchasing this REIT at $10.31 per share. But the real takeaway is the 5.45% dividend yield.

Different futures

Air Canada will be away from the limelight in 2020. A near-term comeback is close to impossible. Summit Industrial would see growth with the rising demand for industrial properties. Logistics companies and e-commerce retailers will need more delivery take-off points.

Speaking of Air Canada’s future…

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends SUMMIT INDUSTRIAL INCOME REIT.

The post Forget Air Canada (TSX:AC) and Airlines: Buy This 1 REIT Stock Instead appeared first on The Motley Fool Canada.

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$10,000 Bull Trap? Why Bitcoin Price Is Now Likely to Pull Back

$10,000 Bull Trap? Why Bitcoin Price Is Now Likely to Pull Back:

Bitcoin price is up 25% for the month of May, but is a pullback now imminent?

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Soar Above Coronavirus With These 3 Canadian Growth Picks

Soar Above Coronavirus With These 3 Canadian Growth Picks:

When many investors think of the TSX or Canadian stocks, the first thing that comes to mind may be energy, or financials, or materials stocks. This makes sense, as these three sectors are central to the Canadian economy and drive domestic stock market performance. Innovation and technology are often ignored.

This is due, in part, to a lack of high profile names aside from Shopify Inc. In this article, I am going to highlight three non-Shopify growth plays for investors to consider.

Constellation Software

Constellation Software (TSX:CSU) is a new company that has ridden the wave of technology supremacy to this point. Compared to other software-as-a-service (SAAS) businesses in the tech sector, Constellation has a relatively sticky revenue stream. This company has large clients, including the Canadian government. Further, Constellation has a growth profile most companies would die for.

Constellation has grown mostly through acquisition. We could see this track record of accretive acquisitions continue in the near term. Companies will continue to be deeply discounted due to pessimism around deteriorating market conditions. There are some analysts who have pegged Constellations’ growth potential for earning around 25% a year on a compounded annual growth rate (CAGR). This makes Constellation an excellent long-term buy-and-hold growth play on any future dips.

Lightspeed POS

For those who believe the economic recovery post-Covid-19 will be of the U-shaped variety, Lightspeed POS (TSX:LSPD) is a high-risk, high-reward way to play growth in the medium term. Being in the business of payment and point of sale solutions for small and medium sized enterprises (SMES), Lightspeed’s sensitivity to economic events affecting SMESs, such as the coronavirus pandemic, makes it a prime candidate for a V-shaped rally trade.

I remain highly concerned about permanent long-term damage arising from this impending recession. But for those who are more bullish on a quick recovery, Lightspeed is a potentially lucrative trade at these levels. The company has recently completed a financing to shore up its balance sheet.

In addition, the company has done a lot of work on updating its POS systems to handle take-out orders. This strategic pivot combined with low monthly fees relative to other expenses make this company’s product “stickier” than other highly sensitive fixed costs that SMES will be focused on cutting, in order to stay alive.

Open Text

Another Canadian software company, Open Text Corp. (TSX:OTEX), is a great option for investors seeking high growth at a reasonable price. This company has continued to report strong numbers despite recent events, due to the continued strength in the secular trend of cloud computing.

If anything, Open Text is one of the few companies out there that could grow out of this pandemic. This feat seems nearly impossible for every other sector. The company’s recently announced partnership with Amazon Web Services makes me even more interested in Open Text’s growth profile.

In terms of Canadian technology growth options on the TSX, Open Text has become one of my top picks of late. The company’s compounded annual revenue growth of 14% is approximately triple that of the TSX. Additionally, the revenue streams for Open Text come mainly (approximately 90%) from outside Canada, providing Canadian investors with geographical currency arbitrage and diversification.

Stay Foolish, my friends.

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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Constellation Software, Shopify, and Shopify. The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends OPEN TEXT CORP.

The post Soar Above Coronavirus With These 3 Canadian Growth Picks appeared first on The Motley Fool Canada.

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2 Regional Canadian Banks Far Cheaper Than the Big Six

2 Regional Canadian Banks Far Cheaper Than the Big Six:

Not to knock the Big Six Canadian banks, but the underrated regional banks such as Canadian Western Bank (TSX:CWB) and Laurentian Bank (TSX:LB) are now trading at very steep discounts to book value after the COVID-19 crash.

The Big Six are praised for their impressive capital ratios and stellar financial flexibility, which is a heck of a lot better than prior to the Financial Crisis. But it’s worth noting that Canada’s regional banks also are on relatively sound footing. I think their capital ratios are more than worthy of your investment dollars, even at these unprecedented depths.

The regional banks do lack the geographical diversification of their bigger peers. But I’d argue that a steep discount on a regional bank stock may more than make up for it. If the price is right, every stock, even those that are less ‘wonderful,’ can be attractive buys.

Consider the following regional Canadian banks if you’re looking for deep value beyond the Big Six.

Canadian Western Bank

As you may have guessed from the name, Canadian Western Bank is primarily focused on the Western Canadian market. With considerable exposure to Alberta, CWB has been under pressure ever since oil prices plunged back in 2014.

After the coronavirus-induced oil demand shock, oil prices fell to new lows (briefly falling into the negatives), and CWB stock imploded. It fared far worse than its Big Six peers during the February-March crash. The stock lost over 52% of its value before posting a partial recovery to $23 and change.

The bank has its fair share of oil and gas (O&G) loans, and because of this, the stock has traded at a widening discount to other banks. But of late, I think the valuation gap has widened too far. I think value hunters can bag a huge bargain with the heavily out-of-favour regional stock, as oil gradually looks to normalize.

CWB stock sports a bountiful 5% yield and trades at a mere 0.8 times book.

Laurentian Bank

If you seek an even larger discount, Quebec-focused regional bank Laurentian may be the horse to bet on. Its shares are currently off 50% from all-time highs. The bank stock trades at 0.6 times book, but does come with a tonne of baggage.

In my last piece on Laurentian, I warned investors against the added risks. The capital ratio, while certainly not abysmal, leaves a lot to be desired relative to its peers. Just over a year ago, Laurentian found had a bit of trouble with its mortgage book and the stock has struggled to break through the $46 ceiling of resistance ever since.

“The bank found itself in a ‘mini mortgage crisis’ a while back, and until now, management has failed to show that it’s able to keep its expenses in check.” I wrote in that earlier piece, urging investors to take a rain check on the name. “As the bank moves ahead with its business model and strategy shake-up, there’s also the potential for other issues to arise should management fail to execute amidst the dire macro environment.”

Which is the better regional Canadian bank to buy?

To this day, there’s still too much baggage, and far too much uncertainty to really tell if Laurentian Bank is actually ‘undervalued,’ even at today’s unprecedented depths. As such, I’d pass on the name and its 8.6% yield in favour of Canadian Western Bank, which I believe has more upside.

If you’re looking for opportunities in this uncertain market, I’d encourage you to consider the following

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Fool contributor Joey Frenette has no position in any of the stocks mentioned.

The post 2 Regional Canadian Banks Far Cheaper Than the Big Six appeared first on The Motley Fool Canada.

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Bitcoin Rising, Satoshi Discoveries, & Google Enters the Race: Bad Crypto News of the Week

Bitcoin Rising, Satoshi Discoveries, & Google Enters the Race: Bad Crypto News of the Week:

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